Guidance Notes for Incorporated Segregated Accounts Company Structures (Insurance and Hybrid Structures) (December 2020)

Summary

This BMA guidance note explains how the Incorporated Segregated Accounts Companies Act 2019 (ISAC Act) applies to insurance and hybrid ISAC structures. It sets out how Incorporated Segregated Accounts Companies (ISACs) and their Incorporated Segregated Accounts (ISAs) are registered and licensed, how fees are assessed, and the governance, reporting and deregistration rules that apply once such structures are operating.

• Structure: An ISAC is licensed as an insurer under the Insurance Act 1978 and may establish multiple ISAs, each a separate legal person; ISAs may write insurance business, conduct investment fund business, or (with Ministerial approval) digital asset business, but only one such licensable activity per ISA at a time (DABA may be combined with insurance or funds business).
• Registration: An ISA cannot exist without an ISAC; the ISAC must apply for its own insurance licence before or at the same time an ISA applies to write insurance, conduct investment fund business, or conduct digital asset business, and applications must disclose the intended ISAs and their business.
• Insurance ISAs: Insurance ISAs are designated Restricted (following a business plan mirroring the ISAC's) or Unrestricted (following a distinct business plan), each requiring specified application materials (business plan, fit and proper details, draft policies) to the BMA.
• Fees: ISACs and ISAs each pay separate initial licensing and annual business fees, generally calculated as a percentage (25-75%) of the fee for the relevant licence class, with fund and digital asset ISAs charged per the relevant Investment Funds Act or DABA fee schedule.
• Reporting: Each ISAC and ISA insurer must prepare an annual return/filing appropriate to its licence class; investment fund and digital asset ISAs must share the same financial year end as the linked ISAC insurer and file accordingly, with possible aggregated reporting or audit waivers in specified circumstances.
• Deregistration and transfers: An ISA may be transferred to another ISAC, converted to a standalone Companies Act company, continued in another jurisdiction, or wound up if its ISAC is dissolved; transfers require special resolutions, BMA approval, and a revised business plan from the receiving ISAC, and are treated as a material change under the Insurance Act, Investment Funds Act and DABA.

The guidance is aimed at existing and prospective insurers, investment fund operators and digital asset business licensees considering an ISAC/ISA structure, and at existing Segregated Account Companies wishing to convert. It is explanatory guidance rather than binding legislation, but it describes the licensing, fee and reporting processes the BMA will apply under the ISAC Act, Insurance Act, Investment Funds Act and Digital Asset Business Act.

Key obligations

• Each ISAC must apply for and hold an insurance licence under the Insurance Act 1978 before or together with any ISA applying to write insurance, conduct investment fund business, or conduct digital asset business
• An ISA may hold only one licensable activity (insurance, investment fund business, or digital asset business) at a time, except that a DABA licence may be combined with an insurance or funds licence
• ISAC applications must disclose the quantity, classes and type of business of all ISAs the ISAC intends to establish, and revised business plans must be submitted if an ISA's business differs from what was previously approved
• Existing Segregated Account Companies wishing to use the ISAC structure must establish an ISAC under the ISAC Act, obtain the necessary BMA licences, and transfer existing business through appropriate legal and regulatory processes
• Each ISAC and ISA insurer must prepare and submit an annual return/filing to the BMA in accordance with the requirements of its licence class
• Investment fund ISAs and digital asset business ISAs must maintain the same financial year end as the ISAC insurer to which they are linked and file individual annual returns accordingly
• An ISA transfer to another ISAC requires special resolutions from both ISACs, BMA approval for the transfer, and submission of a revised business plan by the receiving ISAC
• A deregistration approval letter from the BMA must accompany any application to the Registrar of Companies for dissolution of an ISAC or ISA insurer
• The ISAC must be maintained until all its ISAs have ceased to exist before the ISAC itself can be dissolved

Applies to

Incorporated Segregated Accounts Companies (ISACs), Incorporated Segregated Accounts (ISAs), insurers, investment fund operators, digital asset business licensees, Segregated Account Companies (SACs)